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This can be the financial institution's ability to meet obligations that threaten its economic existence. Conversely, it is the deficiency of marketability belongings that can not be introduced or marketed instantly during crises to prevent loss. It occurs every time a fiscal institution are not able to satisfy its small or long-phrase debt.

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Such as, a mortgage loan financial loan is often sanctioned towards an immovable asset like business residence or a property. These property are stored as collateral until finally the borrower repays the entire financial loan amount.

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